14 minute read
The M&A in Spain
OPERATING AT SCALE
David Brohan, Gaming & Leisure Analyst at Goodbody, says 888 Holdings’ acquisition of William Hill’s international assets highlights the trends dominating today’s gambling market
We are currently experiencing a truly exciting time for the gambling sector. The shift to online gambling continues to accelerate at pace following the Covid-19 pandemic, and the leading players are increasingly recognising the importance of having a robust online offering, ultimately enabling them to operate at scale.
These considerations were clearly at play in 888 Holdings’ recent acquisition of William Hill’s non-US international assets from Caesars Entertainment. The deal is a perfect indicator of the trends dominating the gambling landscape, and the acquisition is set to have a notable impact both on the wider market and the opportunities it provides for 888 going forward.
ACHIEVING SCALE OUTWEIGHS SHORT-TERM DRAWBACKS
If we look closer at the financial elements of the acquisition and its implications for 888, it is clear that the monetary benefits arising from the deal will far outweigh current investor concerns. While the leverage will be high for the group immediately post-completion, the increased scale means that the acquisition will be highly cash generative, enabling 888 to deleverage quickly and regain a stable financial footing.
In the longer-term, the business will benefit from access to transformational opportunities, including improved market share positions and greater-than-anticipated cost synergies due to the fact that 888 owns its own technology. There is additionally increased exposure to the sports vertical, which can create cross sell opportunities throughout the group’s verticals.
POTENTIAL FOR GEOGRAPHIC EXPANSION AND PRIME MARKET SHARE
Online gambling is an industry where scale is key. While 888 as a standalone business has grown significantly in recent years, this acquisition places it in a very strong position as one of the leading operators. The deal would mean 888 now sits within the top three operators in the UK and Spain, and in the top five in other key markets including Germany, the Netherlands, Denmark and Ireland.
The enhanced scale and diversification the deal delivers would enable 888 to further invest in the US and other additional growth markets, allowing the group to take prime market share through geographic expansion. For instance, it expects to launch in 2-4 US states a year, targeting a market share of 3-5% in each of the states they are active in. 888’s expansion in turn would reshape competitor market share within the industry, placing it in fourth place behind Flutter, Bet365 and Entain, but ahead of peers such as Kindred Group and Betsson.
David Brohan
BALANCING ONLINE WITH RETAIL
UK retail has undoubtedly suffered a massive revenue hit due to the multiple Covid-19 lockdowns over the past 18 months. Therefore, one of the main concerns investors have had about acquiring William Hill’s international assets was the performance of its online business. In 2020, online revenue grew by just 8%, significantly below 888’s growth of 52%.
However, a lot of improvements have been made to this part of the business and its online platform is now starting to bear fruit, as evidenced in its performance for the first half of this year – with revenue growing by 38%. This puts the group in a strong position to mitigate any negative headwinds that may arise from UK online regulatory change.
However, with the pandemic easing, there are still a number of benefits from having bricks and mortar stores, not just for 888 but for other players in the sector looking to scale up their omni-channel offering. Consumer demand for in-person gambling has seen strong momentum since the reopening and easing of restrictions.
Also, should advertising restrictions be introduced into UK online gambling, storefronts may prove to be a valuable advertising asset. So long as operators are able to secure short average lease lengths for their stores to ensure flexibility, we expect to see many groups retaining their presence on UK high-streets.
THE FOUR P’S PLUS OF GAMING MARKETING
Online marketing and iGaming veteran Alex Czajkowski provides a gaming industry twist to the four P’s of marketing
Most people have heard of the classic four P’s of Marketing: Product, Price, Promotion and Place (never mind Positioning, Packaging and...). These of course apply to iGaming, as well. But when I’m speaking to clients about international iGaming marketing, there are four P’s I think are even more important. And a fifth must-have P as well.
“Product” is the obvious one. You need to provide the products the market you’re
targeting expects and demands. There’s little point in launching a casino in Japan without pachinko slots, China without baccarat (live dealer especially), North America without blackjack, UK without roulette. But do all the products have to be “customised” for the local markets, e.g. everything for China in red? Probably not – colours do have different meanings in different cultures (in Thailand, for example, every day has its own associated colour!) and their use on your site or in your apps does need to be tested to optimise effectiveness. But look at the success of, say, Playtech’s games in Asia or RTG’s (Real Time Gaming, yes it owns the casino café business, which is large) in the Philippines. People at casino cafes will literally line up behind a terminal with RTG’s T-Rex rather than play on a PC that has just, for instance, Habanero games. This reflects an acceptance of the internationalisation of the products – just as in cinema. Language and currency, most definitely players prefer their own.
This leads us to the next essential P:
“Processing." If you don’t have Interac in Canada you’ll miss half of the market. No Klarna or Giropay in Germany? No UBI in India? No online banking in Thailand? You won’t get off the ground. Players prefer to pay their way, and will find an operator which provides that rather than change their behaviour. And while there are more people learning English in China right now than speak it in the rest of the world, English is not the lingua francaso many people think it is. Although 56% of Germans can speak English, 90% prefer to use a site that is in their native language.
Definitely forget about using Google translate. Our industry has a highly translate. Our industry has a highly specialised vocabulary, and, in some specialised vocabulary, and, in some markets, actually a “coded” slang that markets, actually a “coded” slang that you must deal with to communicate with you must deal with to communicate with players. So that brings us to our third P: players. So that brings us to our third P: "People." You need native or near-native "People." You need native or near-native speakers manning your chat and phone speakers manning your chat and phone lines, writing your copy, doing your social lines, writing your copy, doing your social (be it via LINE in Japan, Indonesia and (be it via LINE in Japan, Indonesia and Thailand, WhatsApp in Malaysia, or of Thailand, WhatsApp in Malaysia, or of course WeChat and Weibo in China). course WeChat and Weibo in China).
The fourth P may come as a surprise: The fourth P may come as a surprise: "Performance." The speed of your site/app "Performance." The speed of your site/app is directly correlated to your success in is directly correlated to your success in the market. There are varying degrees of the market. There are varying degrees of tolerance (Ozzie put up with slower sites tolerance (Ozzie put up with slower sites as they have fewer options) but in as they have fewer options) but in competitive markets, a slow site/app is competitive markets, a slow site/app is a death knell. a death knell.
And I believe there is a fifth, way too And I believe there is a fifth, way too often overlooked, P: "Plan B." Always often overlooked, P: "Plan B." Always have a Plan B. Regulations change (see have a Plan B. Regulations change (see Germany’s stupid and draconian new Germany’s stupid and draconian new rules that took effect this summer), rules that took effect this summer), market conditions (a 25% drop in market conditions (a 25% drop in GDP in Thailand did nothing to help GDP in Thailand did nothing to help operators as, since the tour guides operators as, since the tour guides didn’t need to get their uniforms didn’t need to get their uniforms cleaned, the cleaners couldn’t buy cleaned, the cleaners couldn’t buy their noodles; and the noodle shop their noodles; and the noodle shop guy can’t play baccarat without guy can’t play baccarat without that income…). So count on that income…). So count on something blowing up something blowing up – plan for it. – plan for it.
Product, Processing, Product, Processing, People, Performance and a People, Performance and a Plan B. As Amex used to Plan B. As Amex used to say, “don’t leave home say, “don’t leave home without them.” without them.”
NOT JUST A DREAM
Part two of Alex Czajkowski’s column discusses personalised, scalable and automated content
Player communications, regardless of platform, have to have three essential qualities: timeliness, relevancy and authenticity.
Yours don’t. Neither do mine, yet: close but no cigar.
Because, like you, we are held back by the
Alex Czajkowski
reams of data, the lack of personalisation tools, the time, the staff, the resources, the translations...
So we show welcome offers to players who are already members. Football specials to players who only bet on horses, or sports the player never bets on (and no it’s not cross-selling, it’s an irrelevant waste of space, time and opportunity – players bet on what they think they 'know'). Banners for matches after the event has completed – or way too long before the match kicks off. And all of that is across platforms: the site/app, your social channels, affiliates, emails, etc.
It’s understandable; we’re dealing with hundreds or thousands of matches and bet types; of course the marketing guys put up what they think will be the most popular matches of the day. We do have tech that allows to automatically update the listed prices, but does it put them in the bet slip?
Typically, no, it’s up to the punter to click their way through and build their own accumulator. Of course, if you’re in multiple geos (as you must be), you may need multiple language versions of everything. Here, new technology comes in to help save the day.
Stewart Vassie is probably best known for being Co-founder of Oddschecker, one of the best and most useful sites for sports punters, and as an affiliate. He sold that off to Sky and then started Botsphere to automate sports betting trading desks. He then sold that, so he nows his way around sportsbooks... His new venture, co-founded with Oddschecker alum Lee Pickrell, NowBetNow, looks to automate much of the sportsbook marketing function and address the concerns iGaming firms face listed above: providing personalisation at scale. When I saw his firm push out 70,000 comms on the first Premier League weekend, I was impressed and wanted to know more.
A couple of convos later, I can’t wait to get my hands on it for my next sportsbook client. NowBetNow identifies players’ preferences, down to their most bet team. It not only produces the relevant content to put in front of that Leeds fan, but actually can build bets around their preferences – and drop them on to the bet slip with a single click or two. Faster, easier, more relevant and more personalised. At scale.
“Information drives sports betting,” Vassie says (and casino play I add, as he nods approvingly). “But the difference between comms and compelling comms, making the comms part of a conversation that changes their behaviour, only works when the player feels they are getting real value.”
NowBetNow can present the real-time prices as simple as “here are the prices for the first goalscorer in the Leeds match,” but that’s relatively old hat (presenting it to a known Leeds bettor is new hat).
NowBetNow not only presents live real-time data but knows that the player bets on Leeds, Manchester United and Wolves (for whatever reason!) and can build those accumulators right in the banner.
One click – from the operator’s website, app or affiliate site – enter the amount they want to bet and it’s done.
“This is easily scalable across languages, we’re already in seven,” Vassie said. “The trick is what do they call Tottenham Hotspur in their market and sportsbook back-end? Tottenham Hot Spurs, Hot Spurs, Spurs, Tottenham? Have those variables place – which we do by working closely with our customers – and we can template the offer in any language and feed in the data for the teams.”
Real-time, relevant, accurate offers to players are vital to provide the three essential qualities of player comms: timeliness, relevancy and authenticity. NowBetNow seems to have solved a lot of marcomms problems with this new solution.
PAYMENT ORCHESTRATION
Mark Patrick, Global Head of Payments, CellPoint Digital, argues that the future of iGaming payments is local
Mark Patrick
Merchants are adapting to a customer journey that has changed forever, especially those within the global iGaming market which continues to experience unparalleled growth; largely accelerated by casinos and major sports venues forced to shut down during the pandemic. The online gambling market is expecting annual growth of 12% from 2021-2026, with online revenue increases of 135% in a booming US market. New Jersey is set to become the first state to hit $1bn in annual iGaming revenue in 2021.
With this, the iGaming industry is presented with an unmissable opportunity to scale cross-border. To effectively do so will mean building relationships with – and serving – customers in different territories. This comes with challenges. Typically, these customers have legacy payment systems only designed for domestic use, or they find themselves faced with the expensive rates demanded by international Payment Service Providers (PSPs). With that in mind, how can iGaming companies scale internationally with a flexible payments ecosystem to match? The answer, surprisingly, might lie in going local.
MECHANISMS TO PAY CROSS-BORDER
IGaming companies looking to expand into new countries and territories typically have two options when building out their payments ecosystem. Those brands looking to transact across different countries can work with an international PSP for all their acquiring needs. This approach has positive and negative sides. It can help reduce the time and effort needed to manage a complex payments ecosystem, but likely incurs high costs in the form of sub-optimal transaction rates. In addition, this doesn’t allow for any back-up options in the event of failed payments. Working with a single PSP also limits the payment methods and currencies the merchant can offer, creating friction for the end customer. Another option is for merchants to build out their own payments ecosystem – comprised of various PSPs – in-house. Recent figures suggest that over half (57%) are already working with more than one processor. Doing so allows the merchant to create multiple relationships with several PSPs ‘on-the-ground’ in their country of choice, protecting them to a certain degree from payment rejection, and offering some element of control over transaction costs. Manually developing and maintaining a complex, international payments ecosystem in-house, however, is extremely time-consuming. Perhaps more damaging is the fact that it can cause severe delays for agile merchants looking to move into new markets.
GOING LOCAL TO GO GLOBAL
As a rule, customers want to pay in their local currency, using a familiar method, both of which change on a country-by-country basis. But partnering with local acquirers and PSPs allows merchants to plug into the local ecosystem, not only offering preferred currencies and payment methods, but also utilising the experience of domestic partners to help enhance their payments journey. When it comes to the future of iGaming, integrating several local acquirers instead of one main international player may provide the best outcome. It means merchants are empowered to protect their bottom line, and deliver a frictionless payment experience for their customers.
UNLOCKING LOCAL PARTNERSHIPS WITH PAYMENT ORCHESTRATION
Payment Orchestration Platforms allow iGaming companies to master complex payment needs, while keeping things simple. By integrating directly with local acquirers and PSPs, Payment Orchestration Platforms enable merchants to quickly and efficiently roll-out complicated payment ecosystems in new markets. This can be done at a fraction of the time and cost of integrating directly. The platform can then orchestrate every transaction end-to-end, resulting in a fluid payment journey.
In practice, this means allowing customers to pay how they want, in the currency of their choice, regardless of their location. For merchants, payment orchestration can simplify back-end processes, reduce operational costs and protect them from failed payments, as well as the negative customer experiences that go with them. Furthermore, having access to multiple PSPs means any declined transaction will be re-routed to the next acquirer, ultimately reducing failed transactions and the cart abandonments that tend to follow.
INTERNATIONAL OPPORTUNITY, LOCAL STRATEGY
The opportunity for iGaming companies to scale internationally has never been greater. To protect conversions and build long-lasting relationships with consumers in new markets, they must prioritise the payments experience. Through payment orchestration, merchants can quickly integrate with several local providers to allow customers to pay how they want. Only by embracing a robust local strategy will merchants be able to offer a truly seamless global payments experience.
